Wide Range in Payouts to Massachusetts Towns as Solar Push Flares Up

Massachusetts has one of the most ambitious solar programs in the country. West of Worcester alone, 17 large solar projects have been built with another 27 in the pipeline.

Each town can decide whether to tax solar facilities or to negotiate payments instead of taxes, and some towns are getting much more money than others for solar farms.

Picking a number and sticking with it

Joyce Palmer Fortune, a select board member in Whately, is pointing out a stretch of shining solar panels

“It goes all the way across, over to the tobacco barn over there,” Palmer Fortune says.

The panels sit on a skinny 10-acre plot tucked behind the police station and the highway garage next to Interstate 91.

“Secluded enough that you wouldn’t necessarily notice it, if you thought that type of thing was unsightly,” she says.

Siting solar farms is a new challenge for towns, as is figuring out how to tax them. Palmer Fortune says if Whately had taxed the solar project like any other business, the town would have received less money, although most of it upfront.

Whately chose to negotiate for payments in lieu of taxes, or PILOTS, as they’re known, which offer steady, predictable payments every year — in Whately’s case, for 25 years. Whately based the amount on what wind and hydro projects were getting because there weren’t many solar projects.

“We were looking at PILOT agreements from around the region, New York, all of New England,” she says. “And the numbers were all over the place. But we picked a number that was somewhere in the middle and stuck with that.”

The number was $6,000 per megawatt with an annual increase of 2 ½ percent.

Massachusetts’ big solar push

In the past few years, many other towns have also had to figure out how to assess these properties. That’s because solar development is moving at a quick pace in Massachusetts. The state recently met its 10-year goal of 250 megawatts of solar, four years ahead of schedule.

“It’s the place to go in the northeast for sure,” says solar developer Kirt Mayland from Connecticut, who also works with the New York based solar firm, Soltas.

Mayland says there are many reasons why developers are flocking to Massachusetts, such as the size of its solar program.

“It dwarfs every other state in New England in terms of the amount of megawatts that the government desires,” he says.

More megawatts means developers can build more projects here—and earn more money. For every megawatt hour that’s generated, developers earn what’s called a solar renewable energy credit, which they sell to the utilities. Right now a one-megawatt system can garner about $240,000 a year, just from the sale of the credits.

Mayland says in the past few years, towns in Massachusetts have become savvy about solar.

“A number of developers certainly took advantage of the fact that it was new technology to these towns. I think some of them pushed through PILOTs agreements quickly before the towns educated themselves,” he says.

Competition grows

In an effort to educate towns, the Massachusetts Department of Revenue held workshops in February on how to assess the value of solar projects. And some towns now choose to get additional expertise, like Belchertown, where John Whelihan is Director of Assessments.

“We have to go to the outside consultants, who have experience with these. And still, it’s a fairly new economic program so the consultants had to learn too,” Whelihan says.

Belchertown got $13,400 per megawatt when the town signed an agreement for a new solar project this summer. That’s more than double what Whately got in 2011.

Geoff Beckwith of the Massachusetts Municipal Association says recent growth in the industry could give cities and towns an edge.

“There are more developers. There’s a lot of competition and so, therefore the communities are in a position to be able to ask for more,” Beckwith says.

Beckwith points out there are many factors that influence the amount a community gets. Some projects are built on a brownfield, generating unexpected income for a town. Others are built on publically-owned land so municipalities can negotiate high-priced leases with lower payments. Other communities are getting low-cost electricity out of their deals.

Set the rates or let them negotiate?

Legislation has been proposed that would standardize the payments in lieu of taxes, paid by solar facilities. Beckwith says that would take power away from towns.

“It just gives an incentive to the industry, which is very powerful, to run to the State House and standardize down and reduce what cities and towns can get and just give a windfall to developers,” he says. “So communities should be trusted to work in the best interest of their citizens and to have different flavors, different types of agreements.”

But Mark Sylvia, the commissioner of the Department of Energy Resources, says a standardized approach would be helpful.

“We worked with the Department of Revenue on the bill that was filed two years ago,” Sylvia says. “We support standardization and that bill would have accomplished that.”

Sylvia also says the system in place now has not prevented projects from moving forward.

Not a bad deal

In fact, Whately negotiated an agreement for a second solar project in February. The town will get just about the same amount per megawatt as the first project.

Select board member Joyce Palmer Fortune says it wouldn’t have been fair to charge more. The first project is paying about $11,000 a year now, enough to cover a quarter of a new teacher’s salary.

Palmer Fortune says that’s not bad for a small town on a shoestring budget, better than raising taxes.

“It’s still not anywhere near as big as what we would need to really offset real estate taxes, but it’s at least a step in that direction,” she says.

The state is about to announce new policies for a second solar renewable energy credit program. Once that happens, even more solar development is expected in western Mass and around the state.